After two weeks of bids and counter bids, Dell (news, site) finally announced last night that it was pulling out of the race to acquire data storage provider 3Par. As a result, it is now likely that HP (news, site) will acquire the Fremont, CA, company for the US$ 2.35 billion final offer that has been accepted by the boards of HP and 3Par.

HP’s final offer is more than three times the value of 3Par shares on August 13 when Dell’s first bid for the company was publicized, and about ten times 3Par’s revenue over the past year.

More significantly however, is that when, and if, the deal with HP is finally closed, it will intensify the competition between it and EMC (news, site) for dominance in a storage market, which is lead by EMC at the moment.

The deal is expected to close by the end of the year HP and 3Par said in a joint statement. 3Par said it paid Dell a US$ 72 million breakup fee (a fee paid for accepting a competing company’s bid) stipulated in a previous agreement.

Why Dell Wanted 3Par

Dell wanted 3Par because it hoped to become a major player in the cloud, while at the same time addressing critics who say it has fallen behind rivals IBM, Oracle and EMC in the software services market.

3Par is the last obvious product needed by Dell to provide a full storage portfolio. It already covers the SMB market with its own products, the middle sized enterprise market with EqualLogic, and hoped to cover the upper and data intensive end with 3Par.

Dell and Acquisitions

Dell has been sniffing around the data storage space since at least 2007 when it bought storage company Equallogic for US$ 1.4 billion.

Last year, it also bought Perot Systems for US$ 3.9 billion which provides information technology services and was in the top five of Fortune magazine’s “Most Admired Companies in America” list for IT Services in 2008.

And in July it added Ocarina Networks, a San Jose, Calif.-based data storage company whose technology helps reduce data management costs for an undisclosed sum. Last month Dell also announced that it was buying server-computer maker Scalene Systems.

HP Is Making Deals

Citing Aaron Rakers, an analyst at Stifel Nicolaus & Co. in St. Louis, Bloomberg news agency is reporting that apart from extending its storage portfolio, HP wanted to close the deal to show that it could after the departure of its former CEO Mark Hurd.

Hurd was often seen as the catalyst behind many of HP’s recent deals but left the company on August 6 after concerns about his expenses.

Since then, HP has made two other acquisitions -- Fortify Software Inc. and Stratavia. Speculation has it that Dave Donatelli, who led the 3Par deal, is said to be one of the candidates to replace Hurd.